Wednesday, May 15, 2013

How the Case for Austerity Has Crumbled by Paul Krugman | The New York Review of Books

"In normal times, an arithmetic mistake in an economics paper would be a complete nonevent as far as the wider world was concerned. But in April 2013, the discovery of such a mistake—actually, a coding error in a spreadsheet, coupled with several other flaws in the analysis—not only became the talk of the economics profession, but made headlines. Looking back, we might even conclude that it changed the course of policy."

"So why wasn’t there more caution? The answer, as documented by some of the books reviewed here and unintentionally illustrated by others, lies in both politics and psychology: the case for austerity was and is one that many powerful people want to believe, leading them to seize on anything that looks like a justification. I’ll talk about that will to believe later in this article. First, however, it’s useful to trace the recent history of austerity both as a doctrine and as a policy experiment."